President Joe Biden has ordered the Federal Trade Commission to fight consolidation in the health care sector, saying it drives up prices for consumers and limits their access to care.
The FTC’s new Democratic Majority has signaled that it will not only review traditional mergers between hospitals and other health care providers, but is also interested in certain legal theories of antitrust enforcement that have been less frequently used. This includes whether a merger affects labor market conditions and increasing its scrutiny of vertical mergers, in which hospitals, insurers or other types of healthcare businesses seek to merge with companies that provide the necessary products or services.
Mark Seidman, deputy director at the FTC’s Competition Bureau, spoke with Harris Meyer about these efforts. The interview has been edited for length and clarity.
Q: How did Biden Executive Decree on Promoting Competition Affect the FTC’s Guidance on Antitrust Enforcement in Health Care?
It was gratifying and important to see the president’s focus on hospital mergers and competition, which has been a bipartisan concern for the FTC for at least two decades. The president prioritizing this is an important message for hospital leaders. We feel invigorated and seek to heed the Executive Order’s call to be aggressive in antitrust enforcement.
Q: What were the key takeaways from the public “listening forum” held in April by the FTC and the Department of Justice on the effects of mergers in the healthcare industry?
The biggest takeaway from these listening sessions is the impact that mergers have on real people – the customers of merging hospitals and the people who work for those hospitals – and how it can affect their lives. Antitrust can be a technical area of law, with a strong focus on economics. It’s a reminder that if we’re not careful, we can lose sight of the human impact of a merger.
Q: Some experts wonder if the FTC will expand its antitrust radar to examine the potential anticompetitive effects of hospital mergers in different markets, not just hospital mergers in the same market. An example of a cross-market agreement is the recently announced merger between Advocate Aurora Health in the Midwest and Atrium Health in the Southeast, which will create a system of 67 hospitals worth $27 billion. What are the possibilities of expanded geographic targeting?
The question of local versus regional mergers is difficult to answer in the abstract, because we take each merger on its own facts. We look for mergers that significantly reduce competition, and that can happen in all sorts of ways. Most hospital litigation over the past 20 years has focused on hospitals that were clearly fairly close competitors. It would be a mistake to interpret this as the only type of hospital merger we would study, especially as hospital systems expand.
We are always looking at the multiple ways in which hospital systems compete. We will certainly consider system versus system competition, vertical integration, impact on the labor market, impact on insurers, and how hospitals compete to serve employees of large employers. There is a growing body of economic literature on the potential negative effects of inter-market mergers leading to higher prices, and we are seriously considering this.
Q: Does the FTC plan to challenge hospital mergers because of their impact on the job market, as explained by FTC Chairman Lina Khan? None of the FTC’s recent actions to block hospital mergers have cited the impact on the labor market.
We examine whether hospitals are competing for the same pool of doctors, nurses and other types of workforce. Hospitals are big employers, regardless of the geography in which they exist. A merger between relatively close hospitals can have an impact on the labor market. This has been less of a feature in contentious antitrust cases thus far, but it is a priority policy issue.
Q: Will the increased conservative bias in federal courts given former President Donald Trump’s numerous judicial appointments impact the FTC’s ability to successfully litigate antitrust cases?
In my experience with the courts in hospital and other cases, judges are very interested in the facts of a particular case. They have a deep understanding of antitrust law and the goal of preserving competition. I’m sure if we can put together a factual record that a merger will hurt competition, the court will be very interested. It’s very factual. I have no reason to think that more conservative judges are more or less open to antitrust cases.
Q: FTC commissioners are divided on the issue of antitrust enforcement in vertical merger cases. Do you still expect the agency to pursue more vertical merger cases? And will the FTC issue new guidelines on vertical merger enforcement after its decision to withdraw the 2020 guidelines?
The biggest concern in vertical mergers is giving one competitor control of an input that other competitors need access to. This excludes competitors from that input or increases the cost of that input. This is something we think about when looking at combinations of providers, such as a hospital or an insurer partnering with a group of doctors. We spend a lot of time and energy thinking about the impact of these types of mergers on rival insurers and suppliers.
It is helpful that the FTC and the courts have guidelines on how we will analyze any merger case, even though it is not binding on the courts. The FTC and the Department of Justice recently issued an Information Request for Revised Horizontal and Vertical Merger Guidelines. But the absence of guidelines on vertical mergers does not prevent us from applying the law on vertical mergers. We seek vertical mergers that significantly reduce competition.
Q: Is the FTC focused on reviewing healthcare mergers and acquisitions involving private equity firms, such as the many deals by private equity firms that have built increasingly large specialized medical practices in dermatology and other medical specialties?
We are very aware of the discussion about the effect of private equity in many areas, including health care. But we review mergers that come our way through a merger filing, news story, or complaint. We have to react to what lands on our desk.
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. Along with policy analysis and polls, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is an endowed non-profit organization providing information on health issues to the nation.
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